The federal minimum wage in 2024 remains $7.25 per hour. This rate applies to most non-exempt employees covered by the Fair Labor Standards Act (FLSA). However, there is a specific provision for tipped employees, where a lower direct wage rate applies, supplemented by tips.
Standard Federal Minimum Wage
For the majority of workers across the United States, the federal minimum wage is set at $7.25 per hour. This rate has been in effect since July 24, 2009. Employers are legally required to pay their covered employees at least this amount for every hour worked.
Federal Minimum Wage for Tipped Employees
A different federal minimum wage rate applies to employees who regularly receive tips. For these workers, the federal direct cash wage is $2.13 per hour. This lower direct wage is permissible only if the employee earns enough in actual tips during the workweek to make up the difference between the direct wage and the full federal minimum wage of $7.25 per hour. This difference, which an employer can credit towards their minimum wage obligation, is known as the "tip credit."
Key considerations for tipped employees:
- Tip Credit Calculation: The tip credit amount is $5.12 per hour ($7.25 - $2.13 = $5.12). This means that if an employee earns $2.13 directly from their employer, they must earn at least $5.12 per hour in tips to reach the federal minimum wage of $7.25.
- Employer Responsibility: If an employee's tips combined with the direct cash wage of $2.13 do not equal at least $7.25 per hour, the employer is legally obligated to make up the difference. Employers must ensure that the sum of the direct wage and tips always meets the federal minimum wage requirement.
- "Tipped Employee" Definition: To be considered a "tipped employee" under federal law, an employee must customarily and regularly receive more than $30 per month in tips.
Key Federal Minimum Wage Rates for 2024
Here's a quick overview of the federal minimum wage rates:
| Category | Rate Per Hour |
|---|---|
| Standard Federal Minimum Wage | $7.25 |
| Federal Tipped Minimum Wage | $2.13 |
Federal vs. State Minimum Wages
It is important to note that many states, and even some cities, have their own minimum wage laws that mandate rates higher than the federal standard. When a state or local minimum wage rate is higher than the federal rate, employers are generally required to pay the higher of the two wages. This means that while the federal minimum wage is $7.25 per hour, many employees across the country are paid a higher minimum wage due to state or local laws. Employers must always comply with the minimum wage law (federal, state, or local) that provides the greatest benefit to the employee.
